OPINION: Kenya’s improved business environment a triumph for domestic entrepreneurs

Adan Mohammed

By Adan Mohamed

We have always known this to be true, that Kenya represents a bright spot in Sub-Saharan Africa as an investment hub for both domestic entrepreneurs and foreign investors.

Backed by recent data on global economic activity and reputable global surveys that have endorsed and reinforced this assertion, Kenya has always been committed to convert these analyses into reality.

Characteristically, we uphold that accelerating a private-sector-led, sustainable economic growth constitutes the nuts and bolts that gel the Kenyan economy together.

With our ultimate ambition to pursue an inclusive model of growth that will provide more than 1.3 million new jobs annually going forward, the Government understands first-hand the need to create a conducive business environment for the private sector.

With a very open and global mindset, the Government has worked aggressively, over the past 48 months, to make Kenya an easy place to do business.

Through a multi-institutional Business Environment Delivery Unit under the aegis of the Ministry of Industry, Trade and Cooperatives, Government agencies, Kenya Private Sector Alliance, World Bank Group/International Finance Bank (IFC) among others, we’ve undertaken numerous business reforms; as a matter of fact amongst the highest on the continent.

Bench marking on competitive global best practice, Kenya diagnosed its regulatory business environment and found the need to rid it of the now conventional red-tape that hinders entrepreneurship and creativity among our citizens.

Pertinently, the reforms have involved the re-engineering and remodeling of business processes, recommendation of new business processes and following up on the implementation of these new reforms.

The just released World Bank Group’s Doing Business 2018 Report that places Kenya at position 80 out of 190 from 92 last year is a vindication of Kenya’s quest to creating proficient and all-encompassing ethos for local and foreign enterprises growth in Kenya.

It is a monumental result for Kenya in untold ways. Overall, for two consecutive years( 2016, 2017 reports), Kenya emerged as the 3rd most reformed country in the world, and in 2018 report as the 3rd best in Sub-Saharan Africa.

Out of the 11 indicators that yardsticks a country’s ease of doing business, Kenya made 6 reforms during the year. This included ease of starting a business by merging requisite formal procedures that small businesses need to comply with to register a business; reducing cost of construction permits through elimination of clearance fees from the National Environment Management Authority (NEMA) and the National Construction Authority (NCA); enhancing electricity reliability through investment in distribution infrastructure and establishment of power restoration squads in case of outages; improving access to credit information through distribution of data from utilities; easier payment of taxes online through the iTax platform; and reduction of the time for import documentary compliance through implementation of a single window system. Over the years, we have eliminated the need for SME’s to have lawyers to register their companies, eliminated the need for company secretaries for small businesses as well as the need to hold AGMs for small companies saving them a lot from regulatory compliance and operational costs!

While these reforms are good while they last, Kenya will not rest on its laurels or encourage complacency. Our ambition is to be among the top 50 nations with favorable legislative or regulatory framework by 2020 – at 80, we are on good stead to meeting that target.

Business reforms are intended to increase the level of efficiency for businesses thereby increasing the level of local and foreign direct investments (FDI) which has a positive impact on job creation. For instance, resultant of this progress, the FDI levels in Kenya have risen from $390m in 2013 to nearly $2bn in 2016 making Kenya one of the most preferred investment destinations on the continent. Investments mean jobs for our people.

There exists an annexed body of knowledge from economists that back the correlation, though not causal, between business regulatory environments and a country’s economic fortune. For instance, economic experts have pointed to an existing parallel between GDP per capita, as measured by its natural logarithm, and the World Bank’s “distance to frontier” (DTF) index – which helps assess the absolute level of regulatory performance over time of an economy.

Fundamentally, a better business environment is good for all. Despite possessing comparative advantages, Kenya’s manufacturing base, mostly driven by entrepreneurs has not produced to its potential, and has been outpaced largely by the services sector but remains a key employer in the economy. Burdensome regulation has been one important culprit that we have dealt with and with more than 200 businesses registered daily, we are certainly on the rise.

Eventually, the sequence of expected results is to trigger an increase in registration of Kenyan start-ups, ensuring their smooth operation and further investments and direct increase in sales/turnover or net income. All in all, the results are truly a harbinger of change and testimony that Government is keen to create an investor conducive environment for the private sector.

The writer is the Cabinet Secretary, Ministry of Industry, Trade and Cooperatives

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